The biggest bottleneck to the growth of entrepreneurship in the Non-corporate Small Business sector is the lack of financial support to this sector. Most individuals, especially those living in rural and interior parts of India, have till recently been excluded from the benefits of formal banking system. They never had access to insurance, credit, loans and other financial instruments to help them establish and grow their micro businesses. So, the individuals turn to local money lenders for credit. The loan comes at high interest and often with unbearable conditions, which make these poor unsuspecting people fall in a debt-trap for generations. When businesses fail, the borrowers become vulnerable to the lender’s strong-arm tactics and other forms of humiliation. As per NSSO Survey of 2013, there are close to 5.77 crore small-scale business units, mostly sole proprietorships, which undertake trading, manufacturing, retail and other small-scale activities. Compare this with the organised sector and larger companies that employ 1.25 crore individuals. Clearly, the potential to harness and nurture these micro businesses is vast and the government recognises this. Today, this segment is unregulated and without financial support or cover from the organised financial banking system. The Hon’ble Prime Minister launched the Pradhan Mantri Mudra Yojana on 8th April, 2015. The scheme is aimed at “funding the unfunded”. It is intended to attain development in an inclusive and sustainable manner by supporting and promoting partner institutions and creating an ecosystem of growth for micro enterprises sector. The MUDRA Bank provides for policy guidelines for micro enterprise financing business. It aims at responsible financing practices to ward off over indebtedness and re-finance to Banks/NBFCs/MFIs. It also provides for formulation/facilitation of Credit Guarantee Scheme for providing guarantees to PMMY loans. A common notion about this sector is that extending financial support to this sector may not be sound practice on account of fears of default. This is not correct. At the time of inauguration of the scheme in April this year, our H’ble Prime Minister had mentioned about women’s self-help groups. The Prime Minister had said that the kind of honesty showed by these loan takers is seldom seen in any other sector.

Product / Offerings of MUDRA

Micro Units Development and Refinance Agency Ltd. [MUDRA] is an NBFC supporting development of micro enterprise sector in the country. MUDRA provides refinance support to Banks / MFIs for lending to micro units having loan requirement upto 10 lakh. MUDRA provides refinance to micro business under the Scheme of Pradhan Mantri MUDRA Yojana. The other products are for development support to the sector. The bouquet of offerings of MUDRA is depicted below. The offerings are being targeted across the spectrum of beneficiary segments.

Pradhan Mantri MUDRA Yojana (PMMY)

Under the aegis of Pradhan Mantri Mudra Yojana (PMMY), MUDRA has created products / schemes. The interventions have been named 'Shishu', 'Kishor' and 'Tarun' to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur and also provide a reference point for the next phase of graduation / growth to look forward to :

• Shishu: covering loans upto 50,000/-

• Kishor: covering loans above 50,000/- and upto 5 lakh

• Tarun: covering loans above 5 lakh and upto 10 lakh

It would be ensured that more focus is given to Shishu Category Units and then Kishor and Tarun Categories.

Within the framework and overall objective of development and growth of micro enterprises sector under Shishu, Kishor and Tarun, the products being offered by MUDRA are so designed, to meet requirements of different sectors / business activities as well as business / entrepreneur segments.

Micro Credit Scheme is offered mainly through Micro Finance Institutions (MFIs), which deliver the credit upto Rs.1 lakh, for various micro enterprise activities. Although, the mode of delivery may be through groups like SHGs/JLGs, the loans are given to the individuals for specific income generating micro enterprise activity. The MFIs for availing financial support need to enroll with MUDRA by complying with some of the requirements as notified by MUDRA, from time to time.

Ø Refinance Scheme for Banks

Different banks like Commercial Banks, Regional Rural Banks and Scheduled Cooperative Banks are eligible to avail of refinance support from MUDRA for financing micro enterprise activities. The refinance is available for term loan and working capital loans, upto an amount of 10 lakh per unit. The eligible banks, who have enrolled with MUDRA by complying with the requirements as notified, can avail of refinance from MUDRA for the loan issued under Shishu, Kishor and Tarun categories.

Ø Women Enterprise Programme

In order to encourage women entrepreneurs the financing banks / MFIs may consider extending additional facilities, including interest reduction on their loan. At present, MUDRA extends a reduction of 25bps in its interest rates to MFIs / NBFCs, who are providing loans to women entrepreneurs.

Ø Securitization of loan portfolio

MUDRA also supports Banks / NBFCs / MFIs for raising funds for financing micro enterprises by participating in securitization of their loan assets against micro enterprise portfolio, by providing second loss default guarantee, for credit enhancement and also participating in investment of Pass through Certificate (PTCs) either as Senior or junior investor.

Purpose of MUDRA loan

Mudra loan is extended for a variety of purposes which provide income generation and employment creation. The loans are extended mainly for:

• Business loan for Vendors, Traders, Shopkeepers and other Service Sector activities

• Working capital loan through MUDRA Cards

• Equipment Finance for Micro Units

• Transport Vehicle loans

Following is an illustrative list of the activities that can be covered under MUDRA loans:

Financial support for on lending to individuals for running their shops / trading & business activities / service enterprises and non-farm income generating activities with beneficiary loan size of upto 10 lakh per enterprise / borrower.

Eligibility – WHO ARE ELIGIBLE TO AVAIL LOAN UNDER MUDRA SCHEME?
Any Indian citizen or firm who wants to start his business in any field (other than agriculture) or want to move forward his current business and financial needs (financial needs) up to Rs 10 lakh, the Prime Minister Apply for a loan under the Mudra Loan Scheme.
INTEREST RATES OF MUDRA BANK LOAN – INTEREST RATE
Under the Mudra Loan, there are no fixed interest rates. Interest rates can vary between different banks and bank interest rates can vary depending on the risk of the applicant’s business. Usually Mudra Loan the interest rates are around 12% per year.
No subsidy is given on behalf of the government under the Mudra Loan Scheme. If the applicant has applied for any subsidy under any other scheme in which the government provides the capital subsidy, then the subsidy can be linked to Mudra Loan.

HOW TO APPLY FOR MUDRA LOAN – Process of Receiving Currency Loans
STEP 1: Gathering information and choosing the right bank
There is no fixed procedure for applying for loans under the money scheme. To get the loan, the applicant should first contact the banks around him and gather the complete information about the loan process and interest rate. To get the loan, you have to complete the application form and submit some documents along with it.
STEP 2: Preparing documents and submitting applications
To provide loans, banks usually want to get two types of information based on your financial needs in which they can demand different types of documents:
By trying to find out the various documents such as Balance Sheet, Income Tax Returns, and information about your current business for the past two years, whether you have the ability to repay the loan with interest or not. Banks try to know that you’re There are so many risks in business that they can ensure that the money given by them will be safe.
The bank tries to know your future Business Plan, Project Report, Future Income Estimates etc. to know about the type of loan used by the bank and how much and how much the benefits of business will increase due to that loan.

CHECKLIST FOR MUDRA LOAN (DOCUMENTS REQUIRED)
Usually, for currency loan, you have to submit the following documents along with the application form. The number of Documents may be lower depending on the amount of loan, Business Nature, Bank Rules etc. (for example if you are taking up to 50000 loan, then you may need the Balance Sheet and Income Tax Return etc. Do not fall): Proof of identity – Self certified copy of Voter’s ID card / driving license / PAN Card / Aadhar Card / Passport

3.Proof of Identity / Address of the Business Enterprise – Copies of relevant licenses/registration certificates / other documents pertaining to the ownership, identity, and address of the business unit.

4.The applicant should not be the defaulter in any Bank / Financial institution.

5.Statement of accounts (for the last six months), from the existing banker, if any

6.Last two years, balance sheets of the units with income tax/sales tax retention.

7.Projected balance sheets for one year in case of working capital limits and for the loan in case of term loan (Applicable for all cases from Rs.2 lakhs and above).

11.Asset & Liability statement (In nonabsence of third party guarantee, from the borrower) 12. Partners may be requested to know the net-worth.

13.Photos (two copies) of Proprietor / Partners.

WHOM TO CONTACT FOR ASSISTANCE?

MUDRA has identified 97 Nodal Officers at various SIDBI Regional offices/Branch Offices to act as “first contact persons” for MUDRA. For information on MUDRA products and for any kind of assistance, the borrower can either approach/contact MUDRA office at Mumbai or the identified MUDRA Nodal Officers, whose details (along with contact numbers and mail ids) are made available at MUDRA’s Website. The borrower may also visit MUDRA website, www.mudra.org.in and can send any query/suggestion to [email protected].

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